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2014 (9) TMI 265 - AT - Income TaxAudited profit margin - Arm’s length principle can be applied on domestic transactions or not – Selection of comparables – Functionally different unit – Held that:- Assesses OP margin over sales earned by transaction of sale of goods purchased from associated enterprise, in accordance with the audited segment account, being within safe harbor range of +/- 5% of OP margin of the comparable companies considered by the TPO at 8.82%, the international transaction undertaken by the appellant should be considered at arm's length - since the business model of the BPC is different from the appellant in as much as the BPC enjoys a monopolistic economy and the appellant is established in a competitive market, the same shall not be considered as functionally similar to the appellant and excluded from the final set of comparable companies. TPO and DRP have not appreciated the facts that assessee has made out a strong prima facie case about Bharat Power Corpn., being not an appropriate comparable in terms of functionality and FAR - With the material on record both the authorities ought to have given objective findings on the submissions made by the assessee in this behalf - Besides DRP itself in preceding year has accepted the inclusion of assessee's comparable Spectra Industries Limited, in final list of comparable - TPO's order has not considered this aspect – there was no justification on record to deviate from what DRP has adopted – thus, the matter is to be remitted back to the Ao for fresh adjudication – Decided in favour of Assessee.
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